First Republic Bank Seized and Sold to JPMorgan Chase

On May 1, 2023, regulators seized control of First Republic Bank and sold it to JPMorgan Chase. Founded in 1985, the bank had already been struggling to stay afloat following the collapse of two other lenders in March, which had sowed seeds of worry among both depositors and investors. First Republic Bank’s shuttering has been the most recent banking domino to fall since the collapse of Silicon Valley Bank, Signature Bank, and Silvergate Capital weeks prior. 

JPMorgan’s acquisition of First Republic and the announcement that 84 First Republic branches in eight states would reopen as JPMorgan branches on Monday were made just hours before U.S. markets opened. JPMorgan’s stock rose by 3.5 percent on Monday. In contrast, the stocks of PNC Financial Services and Citizens Financial Group, two regional banks that had bid for First Republic, fell by over 5 percent.

Like Silicon Valley Bank and the others, First Republic’s failure was partly the result of the eroding value of “bank assets such as government bonds and mortgage-backed securities” in the wake of increased interest rates. And, also like Silicon Valley, most of First Republic’s assets exceeded the amount that the FDIC would have normally insured. 

As the banking sector grapples with challenges such as interest rate fluctuations, asset freefall, and increased regulatory scrutiny, many may question if other financial institutions will face the fate of First Republic Bank and Silicon Valley Bank. Now, all eyes are on the Federal Reserve as Chairman Jerome Powell is expected to announce a rate increase on May 3. 

It’s an issue worth following. For more on the banking sector’s challenges, turn to the Independent Institute’s expert analysis in Volume 25, Issue 69: of The Lighthouse, which sheds light on the Federal Reserve, the moral hazard of deposit insurance, and more. 

Jonathan Hofer is a Research Associate at the Independent Institute. He has written extensively on both California and national public policy issues. He holds a BA in political science from the University of California, Berkeley. His research interests include privacy law, student privacy, local surveillance, and the impact of emerging technologies on civil liberties.
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